After both Oak Investment Partners and Onyx dropped out of the bidding, Pivotal Software announced today that it will merge with Chinadotcom through its software unit, CDC Software (CDC).
"We're thrilled with the deal with CDC," says Bo Manning, president and CEO of Pivotal. "As we have said all along, we were looking for a strategic and financial investor that would leave Pivotal intact as we continue in our quest for midmarket dominance--and we received just that."
Pivotal also announced that following the closing of the transaction it expects to accelerate investments in its growth, including increasing technical support headcount by up to 40 percent. Also, it will resume the expansion of its R&D headcount, resume its acquisition program, expand distribution capabilities in Asia through CDC Software, and increase marketing spending by up to 200 percent.
"Right off the bat there are great things happening from the CDC backing," Manning says. "With our management, employees, and product lines intact, we can go after our next phase of growth. Previously we were in a mode where we had to aggressively conserve cash; now we are in an aggressive growth mode."
Under the terms of the merger CDC will offer Pivotal shareholders a choice of two payment options per each Pivotal share owned: either $2.14 comprising $1.00 cash plus $1.14 worth of common shares of CDC, or $2.00 in cash per each share. In addition, Pivotal has received a $2 million loan from CDC, bearing interest at the U.S. prime rate, to be used by Pivotal to pay a $1.5 million break fee to Talisma Corp., to fund working capital requirements, and for general corporate purposes, according to CDC.
The transaction is expected to close before the end of February 2004, subject to the approval of Pivotal's shareholders and the Supreme Court of British Columbia, as well as customary closing conditions.
Prior to Pivotal's decision to merge with CDC, the company originally planned to be purchased by Oak Investment Partners and subsequently merge its product line with Talisma. Following the Oak announcement, Onyx Software made an offer for Pivotal until withdrawing the bid. Oak was given the opportunity to up its offer, but declined.